United Nations Security Council members convened for an emergency session Wednesday in New York to address Israel, Lebanon, Iran and whether an all-out war in the Middle East is preventable.
What Happened: Israeli Ambassador Danny Danon, in his remarks to the UN Security Council, called Iran’s missile strike the “largest” in Israel’s history.
“The council must understand the situation Israel is forced to live in. We are under attack,” Danon said, citing how holy sites were targeted.
Israeli defense systems intercepted most of the 200 missiles Tuesday as they prepped for ground operations, the Associated Press reported.
“The world watched silently as Iran funded and directed attacks against us for the past year, arming and training their proxies for decades,” Danon added. “Now the world must step up. Iran must pay a heavy price for this attack. Anything less is complicity.”
As of early Wednesday afternoon, the meeting remained in session. See video below.
Bracing For Further Escalation
The UN meeting is taking place while Israeli troops battle Hezbollah militants inside Lebanon, making good on Israeli Prime Minister Benjamin Netanyahu‘s vow to retaliate, per Bloomberg.
The Israeli army Wednesday suffered at least eight fatalities since the ground operation began, CNN reported citing Israel Defense Forces.
Iran launched the attack against Israel following the recent killing of Hezbollah leader Hassan Nasrallah.
Since its formation in the early 1980s, Hezbollah — which the U.S. considers a terrorist organization — has received substantial support from Tehran, which views the group as an ally in advancing its influence in the Middle East.
The White House promised consequences for Iran's attack on Israel. On Tuesday, President Joe Biden reiterated at the start of a meeting with officials: “Make no mistake, the United States is fully, fully supportive of Israel.”
Market Reaction: Following the missile attacks from Iran on Israel, plus Tuesday’s job and economic data, major stock indices dropped. As of early Tuesday afternoon:
- The S&P 500 was down slightly by 0.08%.
- The Dow Jones was down by 0.02%.
- The Nasdaq was up by 0.09%.
At last check, ETFs that track the indexes were up:
- SPDR S&P 500 ETF Trust SPY was down 0.01% at $568.56 Tuesday.
- SPDR Dow Jones Industrial Average ETF DIA was down slightly at $421.23.
- The Invesco QQQ Trust QQQ, which tracks the Nasdaq 100, is up 0.22% to $482.33.
“Financial markets have reacted as one would expect to the heightened geopolitical tensions in the Middle East, with a bout of risk aversion sweeping through asset classes in the past 24 hours,” said Matthew Ryan, head of market strategy and global financial services at Ebury.
Equity markets are trading lower and, in currencies, the safe-havens have outperformed most of their peers, he adds. This includes the U.S. dollar, which remains buoyed following some hawkish comments from Federal Reserve Chair Jerome Powell on Monday.
The conflict is also causing broader concerns for inflation and central bank policy. Higher oil prices could undermine the U.S. Federal Reserve’s efforts to control inflation, potentially delaying future interest rate cuts, per The Times of Israel.
What To Look For: Ryan says investors are “rightly fearful” that Israel’s retaliation could disrupt oil supplies. After all, Iran is the seventh-largest oil producer in the world.
The price of gold and oil both spiked higher after the attack. The United States Oil Fund USO was trading slightly higher on the day at $72.13 at last check while the SPDR Gold Trust GLD is down 0.11% to $245.33 Wednesday.
“The wider implication for markets is the rising possibility of a sharp move higher in global oil futures, and another period of elevated energy prices and consumer inflation,” Ryan says.
The ramifications will not be “anywhere near as severe” as those that followed Russia’s invasion of Ukraine, Ryan adds. “So far, at least, the moves in markets have been relatively contained.”
Defense ETFs, as of Wednesday afternoon, were trending up:
- IShares U.S. Aerospace & Defense ETF ITA rose 0.37% to $151.91.
- Invesco Aerospace & Defense ETF PPA is up 0.15% to $116.10.
- SPDR S&P Aerospace & Defense ETF XAR is up 0.67% to $159.98.
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